Can attorney fees be recovered in fraudulent transfer cases under UFTA? Macris & Associates v. Neways Explained

In Macris & Associates v. Neways, the Utah Court of Appeals addressed whether attorney fees can be recovered as consequential damages in actions brought under the Uniform Fraudulent Transfer Act (UFTA). The court’s decision clarified the scope of common law exceptions in statutory fraudulent transfer claims.

Background and Facts

Macris obtained a judgment against Images and Attitude, Inc. for breach of contract. After Images transferred its assets to Neways (owned by the Mowers), Macris brought a second lawsuit against Neways and the Mowers alleging fraudulent conveyance, successor liability, and alter ego claims. The transfer allegedly left Images without sufficient assets to satisfy the judgment. The trial court granted summary judgment for defendants, ruling that Macris could not recover attorney fees or punitive damages under UFTA.

Key Legal Issues

The central issue was whether the third-party litigation exception to Utah’s general rule against attorney fee recovery applies to fraudulent transfer actions under UFTA. This exception allows recovery of attorney fees as consequential damages when a defendant’s wrongful conduct foreseeably causes a plaintiff to incur attorney fees through litigation with a third party.

Court’s Analysis and Holding

The Court of Appeals reversed, holding that the third-party litigation exception applies to UFTA claims. The court emphasized that fraudulent transfer actions existed at common law before UFTA’s enactment, and UFTA merely codified these principles. Since UFTA is silent regarding attorney fees and expressly preserves supplementary principles of law and equity, the common law third-party litigation exception remains available. The court noted that UFTA should be liberally construed as remedial legislation.

Practice Implications

This decision expands potential recovery options for creditors pursuing fraudulent transfer claims. However, practitioners must still satisfy the exception’s requirements: the attorney fees must result from litigation with the party whose conduct necessitated the third-party litigation, and such litigation must be a foreseeable consequence of the defendant’s wrongful acts. The court also clarified that attorney fees are limited to those incurred before the underlying contract claim is satisfied.